Barilla is facing several problems throughout their supply chain, and also some problems internal to the company. The biggest problem is the fluctuating demand and the number of stock-outs that are occurring throughout the supply chain. Barilla is facing problems with the way that information is being passed up the supply chain, problems with promotions, internal problems, and problems with getting the entire supply chain onboard for change. Promotions and Sales Representatives:

The sales strategy of Barilla included enormous discounts and promotions, in terms of volume, transportation and cost. One year was divided into 10-12 canvass periods, during each of which, there would a promotional sale offered by the company. The promotion varied between 1-10% of discount. Sales Representatives were being paid on a commission basis, which is not a right way. They were paid based on the amount of product they sell. So when a promotion goes on, the Sales Representatives try to push that particular product to make more money. This is causing the stores to hold on to more inventory, during a promotion period. But during a non-promotional period,the order quantity would fall down vigorously, which increases the chances of stock-outs, as shown in Figure 3. This practice in changing the order quantitiestends the distributors to rapidly change their weekly ordersto Barilla, leading to a change in Barilla’s overall manufacturing orders. Poor Forecasting by Retailers & Distributors:

The store manager in the retail outlet controls the ordering review process. He checks the inventory level, and if they are in need of a particular product, he places the daily order instantaneously to the distributor. This is not an accurate model of forecasting. The distributor follows a simple periodic review system, without any sophisticated or computerized forecasting tools, which leads to poor forecasts, resulting in high inventory at all the levels throughout the supply chain.

Figure 3 Sales and Stock-outs at Cortese Northeast DC, for the year 1989 Problems with the Lead Times: Barilla’s lead times are also causing large amounts of variability in the supply chain. Barilla had a set time of 8 to 14 days for fulfilling their distributor orders with an average lead time of 10 days. This lead time is relatively long, and the time difference of 6 days between shortest lead time and longest lead time could increase the amount of variability throughout the supply chain. The lead times between the distributors and the supermarkets could fluctuate anywhere from 24 to 48 hours. In terms of hours, this is a very wide range and is a cause of variability between the supermarket’s orders and the distributor’s orders. Ordering Behaviour and Limits for Order Quantity:

The distributors used to have full control over the orders. They ordered for different quantities in different periods, based on promotions and demand fluctuations from supermarkets. Furthermore, there are no specified limits for the order quantities. The distributors ordered low quantities more often which increases the operational difficulty and production cost. Sometimes they ordered as high as possible during promotional periods, which leads to false demand. The fluctuating demand caused by the above factors led to various inefficiencies for Barilla which are listed below 1.Frequent orders, High Production Cost and High Transportation Cost 2.Stock-outs and Customer dissatisfaction

3.Bullwhip effect
4.Out-of-control of the ordering process
5.Operational difficulties and inefficiencies
6.Inflexibility of the supply chain operationsThe JIT-D strategy, which is similar to the JIT (in Toyota Production System), but instead of implementing within the organization, when implemented for the whole supply chain, would positively eliminate the demand variability. But the distributors strongly oppose this strategy for the following reasons. Controversy over POS data sharing:

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...program could solve bullwhip faced by the barilla.
Benefits of implementing JITD
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Reduced inventory levels
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Unexpected disruptions in the supply process can damaged the system (strike or other disturbance)
Higher possibility of unsuccessful implementation because of the huge internal and external resistance
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Higher risks concerning the distribution
2. Conflicts and barriers to JITD iplementation
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Lack of communication of the newly proposed JITD system from top management to different departments.
Lack of explanation of the benefits of JITD.
Created distrust in relation to changes.
Lack of inclusion of employees into the planning process of the JITD system.
Lack of consideration for the needed adaptation of different departments to the JITD system.
Internal conflicts and barriers
Sales perspective of opposing JITD system:
Fear of diminished responsibilities,
Risk of losing shelf space to competitors.
Marketing perspective of opposing JITD system:
Inability of running trade promotions
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Student Name: Marish Raju Durai Raju
NUID : 001945382
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Barilla SpA (A)
Summary
The case study deals with the implementation of Just-in-Time Distribution (JITD) in a renowned pasta producing company Barilla SpA. Barilla SpA was founded by Pietro Barilla in the year 1875 as small shop in Parma, Italy. It soon became the largest pasta producing company in the world. But during the 1980s its manufacturing and distribution system were strained by fluctuating demands from its distributors and incurred high manufacturing costs. In order to tackle the fluctuating demands, Giorgio Maggiali, the Director of Logistics at Barilla Spa wanted to carry out an alternative approach rather than the conventional practice of delivering products based on orders placed by the distributors. He suggested implementing the Just-in-Time Distribution that was proposed by his predecessor Brando Vitali. This system of distribution was criticized and faced resistance externally from distributors and internally by the sales and marketing department.
Underlying causes that led to JITD
The case study describes some of the underlying causes that lead to the creation of the JITD program at Barilla SpA. The most important contributing factor was high fluctuations in demand. As seen from Exhibit 12 of the case study, there’s huge...

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Monday, April 29, 2013
Forecasting
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CASE REPORT
Barilla SpA
Part 1 – Executive Summary
The most important issue Barilla faces is the variability in distributor’s demand or order
patterns even though consumer demand is relatively stable. To date, implementation of the Just in Time Distribution System (JITD) has not been successful. It has been resisted both internally and externally with distribution network. The company either can implement JITD or it should reject the strategy and develop a new one.
Rather than placing traditional orders with our factories, the distributors will instead provide us the demand information from the retail store locations. Using the data from the retail store orders, we can determine the optimum schedule upon which to base our production and distribution plans. This will eliminate demand fluctuation and the current lack of ability to plan. We will determine the replenishment orders for the distributors, offering them an additional value added service and minimizing stock outs. The benefits of the JITD system include reduced manufacturing costs, reduced inventory and carrying costs, production planning ability, and increased supply chain visibility..
The new strategy for implementing the JITD system will include a more targeted approach, only offering a smaller number of SKU’s that will provide the most dramatic returns. Also, we will offer alternative incentives to both our distributors...

...Barilla SpA currently must decide the logistic planning of its future production and distribution systems. The company is suffering from issues dealing with fluctuating demand from distributors, and the lack of end user sales and demand information. Brando Vitali, the former director of logistics for Barilla, suggested the use of a Just-In-Time Distribution (JITD) system in order to fix these issues. After much resistance fromdistributors and Barilla employees itself, a decision as to whether to implement the JITD system or other alternatives much be chosen.
Causes for the Bullwhip Effect and other Issues
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Promotions
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...﻿Businesses use forecasting to predict future, trends, patterns, and business with data to develop a forecast. This data is used to predict future sales. In forecasting we use testing and reasonableness to predict future events. Companies use this method to compare their sales with other companies. Forecasting has many benefits to include; what is the popular product customers are purchasing, and it enhances cash flow, and identifies patterns and trends inside a corporation. Using this method is popular and is quite achieving when done effectively.
Forecasting can result in decrease in product cost, increase company efficiency, and increase revenue. This method has to be administered at it entirely to reap the best benefits. Forecasting also requires a company to keep record of inventory, sales, and customer satisfaction. Many items are needed such as; financial statements, accounting records. In order to be successful you have to know what the customers want and why they want it.
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